Question

Connelly Inc., a manufacturer of quality electric ice cream makers, has experienced a steady growth in sales over the past few years. Because her business has grown, Jan De Janey, the president, believes she needs an aggressive advertising campaign next year to maintain the company's growth. To prepare for the growth, the accountant prepared the following data for the current year. $ 13.50 14.50 6.00 34.00 $ Variable costs per Ice cream maker Direct labor Direct materials Variable overhead Total variable costs Fixed costs Manufacturing Selling Administrative Total fixed costs Selling price per unit Expected sales (units) $ 82,500 42,000 356,000 $ 480,500 $ 67.00 30,000 Required: 1. If the costs and sales price remain the same, what is the projected operating profit for the coming year? 2. What is the breakeven point in units for the coming year? 3. Jan has set the sales target for 35,000 ice cream makers, which she thinks she can achieve by an additional fixed selling expense of $200,000 for advertising. All other costs remain as per the data in the above table. What will be the operating profit if the additional $200,000 is spent on advertising and sales rise to 35,000 units? 4-a. What will be the new breakeven point if the additional $200,000 is spent on advertising?

Answer 1

A Pesunit Sados 67.00 :- V.C. 34.00- Contributin 33. 0 X 30.000 F.C. ! Profitio 990,000 4 80,500 5,09,500 -Boeck even pointe Fixed cost Contributia CPOO unit 480.500 33 McCd1900M 14,561 units (3 L A O Sales 67 x 30000s 2.945,000 Vauiceble cost 34X35000.-(190,000. n confoibution 111,55000 Fixed Aro Cost 680.SOO Profit 424.500 beregck-even points Fixed cost Cont burim 680,500 33 = (20,621, 21 UNF

Contriburim nome statement. - Saues Revenue Variable Cost contributin - Fixed cost Profit 135000x 64 ) (33000 x 34) Margin. 23.45000 11.920002 11,55000 6,10,500 474,500 Change in fixed cost = 200000 x100 480,500 21741.627 (1) change in bdecis uuen = (29, 621-14501) 149.5.61 +41.627 targeted Scuor, Poofitt fixed cost Vaible cost (per unit 509500 +680500 33 11,800 = 36,061 unit

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